Understanding Emerging Market

Question 1

Advanced economies

Answer 1

• post-industrial countries, high capita income, highly competitive, well-developed infrastructure
• dominate business, democratic, multiparty government, capitalism, high purchasing power (USA, japan, canada, western Europe etc)
• characteristics: mean age 39, free economic/political freedom, low country risk, strong intellectual property protection, strong infrastructure

Question 2

Developing economies

Answer 2

• low income countries, limited industrialisation, stagnant economies
• underdeveloped, third world countries, lack of education → poverty, lack of health care (–> low production with many sick), governments in debt (Bolivia, Nigeria, Bangladesh)

Question 3

Emerging markets

Answer 3

• former developing economies that now achieved substantial industrialisation, modernisation, improved living standards and remarkable economic growth
• rapid improvement in living standards, growth in middle class, attractive for export, FDI, global sourcing
• characteristics: mean age 32, moderately free or mostly not free economic/political freedom, variable country risk, moderate to improving intellectual property protection and infrastructure

Question 4

Why are emerging markets attractive?

Answer 4

1.Emerging Markets as manufacturing bases
(raw materials, natural resources, labour)
2. Emerging markets as sourcing destinations (outsourcing, offshoring)
3. Target market
- big competitors, huge home market (in big countries), they have big potential, good at what they do

Question 5

What should be considered when entering emerging/developing markets (criteria for attractiveness)

Answer 5

• Market size, market growth rate, consumption capacity, infrastructure, economic freedom and country risk

Question 6

What is per capita income and why is it a risky measurement?

Answer 6

• GDP/total population (all sources of income)
• National income= value of all final goods and services produced a year
• unofficial transactions
• majority of population is on the low end of income scale, average is not accurate
• governments under report national income

Question 7

Risks and challenges in Emerging Markets

Answer 7

• political instability, weak intellectual property protection, lack of transparency, poor infrastructure, partner availability (trust), dominance of family conglomerates

Question 8

Family Conglomerates

Answer 8

• holds largest market share in several industries, and various C.A because of government protection and support, networks in various industries, superior market knowledge and access to capital
• they control economy and employment in the market and provide huge tax revenues

Question 9

Strategies for succeeding in Emerging Markets

Answer 9

• customize to unique market needs
• local conditions, respect, loyalty, alternative promoting
• partner with family conglomerates
• reduces risk, relationship with gov, contacts and resources
• market to government in E.M
• gov buy huge qty of products, state enterprises buys goods and services from foreign companies (airlines, banking etc)
• buy big quantities

Question 10

Foster economy and microfinance

Answer 10

Foster economy = advanced economy companies invest in less developed countries to create jobs
Microfinance= provide small-scale financial services like microloans to poor countries → facilitate entrepreneurship